Apple Inc. (NASDAQ:AAPL) is facing a new challenge to continue its growth particularly in China after the Chinese government banned the company’s mobile entertainment services—iBooks and iTunes Movies stores.
The iPhone maker initially received approval from the Chinese government to offer its mobile entertainment services in the country. Last week, the State Administration of Press, Publication, Radio, Film and Television decided to close the iBooks and iTunes Movies, six months after Apple received a blessing from the government to introduce the services.
Apple iPhone sales expected to drop
China’s ban on Apple’s services came as the tech giant prepares to release its second-quarter financial results. The tech giant is expected to report its first revenue decline since 2003.
Apple’s executives expected iPhone sales to drop in the second quarter. The tech giant iPhone shipments were below expectations during its holiday quarter. Investors are concern about any kind of problem for the tech giant in China, its key growth area.
Forrester analyst Frank Gillert, commented, “Is this the beginning of more pressure on Apple by the Chinese government? It’s a symbolic turn, and the question is, to what extent is it a harbinger?”
Ban is only troubling if it persists
Bob O’Donnell, an analyst at TECHnalysis Research, noted that Apple’s leadership considers its mobile entertainment services as a potential source of revenue, which could help boost its success in China.
According to him, the ban “raises questions in an area that we know long-term is going to be very strategically important to Apple.” O’Donnell added that the ban will be “troubling if it persists.”
“People who are buying iPhones in China aren’t buying them for iTunes. They are buying it for the status and the cachet of owning an Apple product, and that is really more about the hardware,” added O’Donell.
Apple has a strong working relationship with Chinese officials based on the fact that the company managed to launch a series of services including Apple Pay in China.
A spokesman for Apple recently stated, “We hope to make books and movies available again to our customers in China as soon as possible.”
Wall Street analyst estimated a 14% decline in the tech giant’s adjusted earnings to $2.00 per share and a 10% declines in revenue to $52 billion based on data compiled by Thomson Reuters I/B/E/S.
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